Merck recently became the first drugmaker to legally challenge the White House’s Medicare drug price negotiation program — but the company’s defense doesn’t seem to have any legs, healthcare law expert Robin Feldman said in a recent interview.
The pharmaceutical company filed a lawsuit against the U.S. government on Tuesday, arguing that the program violates the Constitution’s First and Fifth Amendments. But the drugmaker “will have a heavy lift” to convince the courts that the negotiations go against either of those, said Feldman, who is a law professor at UC Law San Francisco, in an interview.
The Biden administration’s plan for drug pricing reform seeks to save $25 billion annually by 2031 through negotiating the prices for medicines covered by Medicare. In March, the White House released a framework of what these negotiations would look like.
The first Medicare drug price negotiation is set for September, when the Centers for Medicare & Medicaid Services will determine its 10 most costly medications. Once negotiations for this group of drugs are over, the prices will go into effect in 2026.
Merck may be the first pharmaceutical company to sue over the country’s drug pricing reform efforts, but it certainly isn’t the only one that opposes the plan. When the U.S. announced that it was going to start allowing drug price negotiations, it was seen as a rare legislative loss for the pharmaceutical industry — drugmakers swiftly took issue with the program, saying that it would lead to significant profit losses and therefore hinder innovation.
In its complaint, which was filed against HHS and CMS, Merck argued that the drug pricing reform program would force pharmaceutical firms to negotiate prices for drugs at below market rates. The company called the negotiation plan “tantamount to extortion.”
Merck went on to say that the plan violates the Fifth Amendment’s Compensation Clause — which stipulates that private property not “be taken for public use without just compensation.” From looking at historical and textual precedents, Feldman argued that patents are not considered private property for the purposes of the Fifth Amendment’s Compensation Clause.
Private rights and patents are “simply two different beasts,” she argued.
“As Justice Thomas has noted, the Founders considered patents to be akin to a government-granted franchise, not the core ‘private rights’ of the Fifth Amendment’s history. The reverence that the Founders gave to property like land is worlds apart from what is reflected in the patent clause of the Constitution. Patents are limited grants given for the specific purpose of benefiting the public,” she said.
Feldman also pointed out that the Supreme Court’s Compensation Clause doctrines are “universally recognized” as problematic.
“From a purely practical standpoint, applying the Compensation Clause to patents would be a mess. If patents were private property under the Compensation Clause, then all of the doctrine — with its convoluted, often contradictory tests, prongs and factors — would apply to patents,” she explained.
In Feldman’s view, applying this clause to patents “makes no sense” from a patent perspective. Patents are not granted for the benefit of inventors — the government issues patents because it believes that creating incentives for inventors will benefit society. This means that patents fall within the notion of a public right, not the core private rights enshrined in the constitution, she argued.
Merck’s lawsuit also said that the drug negotiation program violates the First Amendment’s protections of free speech by forcing drugmakers to sign agreements saying that the prices are fair. The company argued that the government is making pharmaceutical firms perform “political Kabuki theater” by having them pretend they think the prices are satisfactory.
But Feldman isn’t quite sure that signing a contract counts as a form of speech. She said it’s hard to imagine that the government will require drugmakers to sign a paper that says ‘I declare this is a fair price.’
“Even with the speech involved in disclosure requirements, the government requires disclosure of all kinds of items from income on tax returns to personal information for a driver’s license. If courts were to find that disclosure for the purposes of a government program violates the First Amendment, it would have a sweeping effect throughout the nation,” Feldman explained.
Merck said it is willing to take its complaint all the way to the Supreme Court and Feldman predicted that the case is likely heading up those stairs given “key issues in this area of the law are undecided.”
Sales for Keytruda, Merck’s top-selling drug, generated nearly $21 billion in revenue last year. By 2026, analysts predict that the total will exceed $30 billion. The drug could be subject to price negotiations as soon as 2028.
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